AirAsia could buy 200 Airbus planes-sources

By Tim Hepher

PARIS, June 10 (Reuters) – AirAsia could buy as many as 200 Airbus jets in a landmark deal shaping up to dominate the Paris Air Show, industry sources said.

The deal is among the most keenly awaited in a recovering civil aviation sector, and could help to determine the success of the European planemaker’s efforts to stymy a draft project by rival Boeing to design a new 150-200 seat aircraft.

Under pressure from airines to provide a cushion against high fuel costs, Airbus is marketing a new version of its best-selling A320 passenger jet with new engines which it says will save 15 percent in fuel bills starting from late 2015.

Malaysia-based AirAsia has said it is considering buying at least 150 of the “A320neo” aircraft as the region’s largest budget carrier expands in the face of high oil prices.

But industry sources told Reuters that the range of negotiations is higher than previously expected and could reach 200 planes, trumping a 180-plane provisional order from India’s IndiGo as the industry’s largest ever by number of aircraft.

“They are talking about 150 to 200 aircraft,” an industry source familiar with the negotiations said, asking not to be named.

Such a deal would be worth $14 billion to $18 billion at list prices, depending on the exact model of aircraft involved, though big plane orders tend to generate significant discounts.

The record for the largest Airbus deal by value is held by Emirates airine with a $22 bilion purchase in 2007.

EADS subsidiary Airbus declined to comment. A spokesperson for AirAsia said talks were continuing.

Both sides hope to announce the deal at the Paris Air Show on June 20-26 but the size of the deal and its timing remain uncertain because of the sums involved, industry sources said.

AirAsia founder Tony Fernandes has set his sights on doubling the size of the nine-year-old airline to rival Southwest Airlines’ fleet of more than 500 jets.

The airline has already ordered 175 of the original design of A320, of which 86 have yet to be delivered.

 

BOOST FOR GE, SAFRAN

Boeing is mulling whether to follow Airbus down the “re-engining” route by tinkering with its 737 passenger jet or making more revolutionary changes with an all-new plane offering even bigger fuel savings to cash-tight airlines from 2020.

“The A320neo appears to have good traction with current A320 fliers, particularly low cost carriers,” said Rob Stallard, aviation analyst at RBC Capital Markets, who predicts around 300 orders for the $90-million jetliner by the end of the year.

“Even if Boeing goes ahead with a clean-sheet new narrowbody with entry into service around 2020, we think most Airbus narrowbody customers will stick with the neo due to the high cost of switching providers,” he added.

Airline executives say a key factor for Boeing will be whether Airbus manages to convert any of its major traditional clients, especially U.S.-based ones such as Southwest.

The AirAsia order, if confirmed, could also give a much-needed boost to transatlantic consortium CFM International.

Industry sources say the Cincinnati-based company is the front-runner to win a lucrative contract for the airplanes’ engines, breaking a drought of orders after rival Pratt & Whitney scooped up most orders so far for the A320neo.

CFM is a joint venture between General Electric and France’s Safran.

Pratt & Whitney has developed an engine called the Geared Turbofan with a change of architecture for the narrowbody 737 and A320 market, the largest slice of the commercial aerospace industry worth $1.7 trillion in plane sales over 20 years.

CFM’s new LEAP-X engine depends more on new materials. (Additional reporting by Min Hun Fong; Editing by David Cowell)